Evaluating Strategic Business Alliances

Strategic Alliances are formal relationships between two or more parties for the objective of pursuing an agreed upon set of goals or meeting critical needs of business. Partners in a strategic alliance may provide resources like distribution channels, products, manufacturing capabilities and intellectual property and business expertise.

Strategic alliances can be considered to be a collaboration or cooperation with an aim for synergy. In this synergy, each partner hopes that the benefits they get will be greater than those gained from individual efforts. Strategic alliances often involve transfer of technologies, including access to expertise and knowledge, economic specialization and shared risks, along with shared expenses.

Benefits of Strategic Alliances

Listed below are some of the benefits that a strategic alliance can bring to those involved:

  • Access to the distribution channels and international market presence of the partners
  • Access to the technology, products and intellectual properties of partners
  • Access to the capital of the partners
  • New markets for services and products or new products for customers
  • Increase in brand awareness through the channels provided by the partners
  • Reduction in the product development time and faster-to-market products
  • Reduction in risks and R&D costs
  • Skills related to management

The success rate of strategic alliances is increasing every day – this is good for consumers and businesses alike. It is similar to a joint venture. Every partner retains his own identity and yet, they come together to achieve a single purpose. Whenever you are developing a strategic alliance, you need to take certain factors into consideration. For instance, it is mandatory to evaluate the capability of each partner within the alliance.

There are four main areas along with specific questions that you need to answer in order to determine your own readiness for a particular alliance.

  • Assessment of contributions: Assess the contributions that you or your partner can bring to the alliance and the goals of each person.
  • Agreement to all terms:
    1. Area
    2. Joint operations
    3. Net benefits
  • Tasks and skills agreement: You need to determine the person managing operations. You also need to know who will be responsible for completing specific tasks and set the basis for the division of duties.
  • Measuring and defining progress: You need to specify and reach an agreement on who will be handling sales and when and which target market is to be pursued.

Evaluate your interests and those of your partners. Strategic interests need to be similar, along with comparable services and materials. Economic interests should have sufficient benefit for each party to maintain the commitment.

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